U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
CONCIERGE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 000-29913
State of Incorporation: Nevada
IRS Employer I.D. Number: 95-4442384
22048 Sherman Way, Suite 301
Canoga Park, CA 91303
818-610-0310
----------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of November 8, 2006, there were 147,292,747 shares of the Registrant's
Common Stock, $0.001 par value, outstanding.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act. Yes [X] No [ ]
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
1
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 17
Item 3. Controls and Procedures 18
PART II - Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
----
Balance Sheet September 30, 2006 (Unaudited) 4
Consolidated Statements of Operations For The Three Month
Periods Ended September 30, 2006 and 2005
and the Period from September 20, 1996 (Inception) to
September 30, 2006 (Unaudited) 5
Statements of Cash Flows For The Three Month Periods Ended
September 30, 2006 and 2005 and the Period from
September 20, 1996 (Inception) to September 30, 2006 (Unaudited) 6
Notes to Unaudited Financial Statements 7
3
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2006
(UNAUDITED)
ASSETS
------
CURRENT ASSETS:
Due from related party $ 903
-----------
$ 903
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 408,104
Notes payable - related parties 127,500
-----------
Total current liabilities 535,604
STOCKHOLDERS' DEFICIT:
Preferred stock, par value $.001 per share; 10,000,000
shares authorized; none issued --
Common stock, $.001 par value; 190,000,000 shares
authorized; issued and outstanding 142,292,747 142,293
Additional paid in capital 3,238,334
Deficit accumulated during the development stage (3,915,328)
-----------
Total stockholders' deficit (534,701)
-----------
$ 903
===========
The accompanying notes are an integral part of these financial statements.
4
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005
AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO SEPTEMBER 30, 2006
(UNAUDITED)
For the Period
Three Month Periods Ended From September 20,
September 30, 1996 (Inception)
2006 2005 to September 30, 2006
------------- ------------- ---------------------
COSTS AND EXPENSES
Product Launch Expenses $ -- $ -- $ 1,077,785
Impairment of Assets -- -- 988,443
General & Administrative Expenses (6,020) 8,571 1,477,890
------------- ------------- ---------------------
TOTAL COSTS AND EXPENSES (6,020) 8,571 3,544,118
OTHER INCOME (EXPENSES)
Other Income 5 -- 118
Settlement Income -- -- 52,600
Litigation Settlement -- -- (135,000)
------------- ------------- ---------------------
TOTAL OTHER INCOME (EXPENSES) 5 -- (82,282)
------------- ------------- ---------------------
NET LOSS BEFORE INCOME TAXES (6,015) (8,571) (3,626,400)
Provision of Income Taxes -- 1,600 10,400
------------- ------------- ---------------------
NET LOSS $ (6,015) $ (10,171) $ (3,636,800)
============= ============= =====================
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING, BASIC AND DILUTED 142,292,747 142,292,747
============= =============
BASIC AND DILUTED NET LOSS PER SHARE $ (0.00) $ (0.00)
============= =============
The accompanying notes are an integral part of these financial statements.
5
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005
AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO SEPTEMBER 30, 2006
UNAUDITED
September 20, 1996
September 30, September 30, (inception) to
2006 2005 September 30, 2006
------------- ------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,015) $ (10,171) $ (3,636,800)
Adjustments to reconcile net loss to net cash used in
operating activities:
Impairment of asset -- -- 742,643
Depreciation and amortization -- -- 13,155
Stock issued for services -- -- 496,352
Decrease in current assets:
Prepaid expense -- -- (245,800)
Increase (decrease) in current liabilities:
Accrued expenses 5,127 (7,056) 323,571
------------- ------------- ------------------
Net cash used in operating activities (888) (17,227) (2,306,879)
------------- ------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received on acquisition of subsidiary -- -- 2,912
Note receivable - related party -- -- (100,000)
Acquisition of equipment -- -- (12,910)
------------- ------------- ------------------
Net cash used in investing activities -- -- (109,998)
------------- ------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due from related party (744) (17,818) (904)
Proceeds from Issuance of Shares -- -- 587,007
Proceeds from stock subscription forfeited -- -- 10,000
Proceeds from advance subscriptions -- -- 1,772,983
Costs and expenses of advance subscriptions -- -- (79,710)
Proceeds from (payments to) related party loans (2,251) 55,000 127,500
------------- ------------- ------------------
Net cash provided by (used in) financing activities (2,995) 37,183 2,416,877
------------- ------------- ------------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (3,882) 19,956 --
CASH & CASH EQUIVALENTS, BEGINNING BALANCE 3,882 648 --
------------- ------------- ------------------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ -- $ 20,604 $ --
============= ============= ==================
The accompanying notes are an integral part of these financial statements.
6
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Concierge Technologies, Inc., (the "Company"), a California corporation, was
incorporated on August 18, 1993 as Fanfest, Inc. In August 1995 the Company
changed its name to Starfest, Inc. During 1998, the Company was inactive, just
having minimal administrative expenses. During 1999 the Company attempted to
pursue operations in the online adult entertainment field. There were no
revenues from this endeavor. On March 20, 2002, the Company changed its name to
Concierge Technologies, Inc.
In March 2000, the Company acquired approximately 96.83 percent (8,250,000
shares) of the common stock of MAS Acquisition XX Corp. (MAS XX) for $314,688.
This amount was expensed in March 2000 as at the time of the acquisition, MAS XX
had no assets or liabilities and was inactive. On March 21, 2002, the Company
consummated a merger with Concierge, Inc.
Concierge, Inc. ("CI") was a development stage enterprise incorporated in the
state of Nevada on September 20, 1996. The CI had undertaken the development and
marketing of a new technology, a unified messaging product "The Personal
Communications Attendant" ("PCA(TM)"). "PCA(TM)" will provide a means by which
the user of Internet e-mail can have e-mail messages spoken to him/her over any
touch-tone telephone or wireless phone in the world. To-date, the Company has
not earned any revenue.
On April 6, 2004 the Company entered into a Stock Purchase Agreement with Planet
Halo, Inc. (PHI) whereby, the Company purchased all of the outstanding and
issued shares of PHI in exchange for 10 million shares of the Company's common
stock valued at $500,000. On May 5, 2004 the Company issued the shares on a
ratio of 8.232 shares of its common stock to each share of PHI stock to the
former shareholders of PHI. The existing PHI shares were then retired and
cancelled. The Company is now the sole shareholder of PHI, a Nevada corporation.
On May 5, 2004 the President of PHI was officially appointed to the Board of
Directors of the Company along with one other PHI named appointee (Note 12).
PHI is a development stage company in the wireless telecommunications industry
and plans to design, manufacture, sale and distribution of hardware and services
that include a hand-held wireless Internet appliance/cell phone known as the
"Halo", and an integrated wireless gateway interface to the Internet named
"Halomail."
The accounting policies of the Company are in accordance with generally accepted
accounting principles and conform to the standards applicable to development
stage companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
The accompanying Interim Condensed Financial Statements are prepared in
accordance with rules set forth in Regulation SB of the Securities and Exchange
Commission. Accordingly, these statements do not include all disclosures
required under generally accepted principles and should be read in conjunction
with the audited financial statements included in the Company's form 10KSB for
the year ended June 30, 2006. In the opinion of management, all adjustments
consisting of normal reoccurring accruals have been made to the financial
statements. The results of operation for the three months ended September 30,
2006 are not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 2007.
7
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of Concierge Technologies, Inc. (parent) and its wholly owned
subsidiary, Planet Halo, Inc. All significant inter-company transactions and
accounts have been eliminated in consolidation.
Use of estimates
The preparation of financial statements is in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128
superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per
share for all periods presented has been restated to reflect the adoption of
SFAS No. 128. Basic net loss per share is based upon the weighted average number
of common shares outstanding. Diluted net loss per share is based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period.
Stock-based compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using the existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and
related interpretations with pro forma disclosure of what net income and
earnings per share would have been had the Company adopted the new fair value
method. The company uses the intrinsic value method prescribed by APB25 and has
opted for the disclosure provisions of SFAS No.123. The implementation of this
standard did not have any material impact on the Company's financial statements.
Issuance of shares for service
Valuation of shares for services is based on the estimated fair market value of
the services performed.
Fair value of financial instruments
Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments, requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.
8
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition
Revenue is recognized when earned. The Company's revenue recognition policies
are in compliance with all applicable accounting regulations, including American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
97-2, Software Revenue Recognition, SOP 98-9, Modification of SOP 97-2 and Staff
accounting bulletin (SAB) 104. With Respect to Certain Transactions. Revenue
from license programs is recorded when the software has been delivered and the
customer is invoiced. Revenue from packaged product sales to and through
distributors and resellers is recorded when related products are shipped. The
Company does not charge monthly service fee, instead charges only one-time
purchase price and the option of buying upgrades at a fixed fee based on fair
value of the upgrade. When the revenue recognition criteria required for
distributor and reseller arrangements are not met, revenue is recognized as
payments are received. Costs related to insignificant obligations, which include
telephone support for certain products, are accrued. Provisions are recorded for
returns, concessions and bad debts. Cost of revenue includes direct costs to
produce and distribute product and direct costs to provide online services,
consulting, product support, and training and certification of system
integrators. Research and development costs are expensed as incurred. The
company did not earn any revenue in the years ended June 30, 2006 and 2005.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
period presentation.
3. RECENT PRONOUNCEMENTS
In September 2006, FASB issued SFAS 158 `Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans--an amendment of FASB Statements
No. 87, 88, 106, and 132(R)' This Statement improves financial reporting by
requiring an employer to recognize the overfunded or underfunded status of a
defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity or changes in unrestricted net assets
of a not-for-profit organization. This Statement also improves financial
reporting by requiring an employer to measure the funded status of a plan as of
the date of its year-end statement of financial position, with limited
exceptions. An employer with publicly traded equity securities is required to
initially recognize the funded status of a defined benefit postretirement plan
and to provide the required disclosures as of the end of the fiscal year ending
after December 15, 2006. An employer without publicly traded equity securities
is required to recognize the funded status of a defined benefit postretirement
plan and to provide the required disclosures as of the end of the fiscal year
ending after June 15, 2007. However, an employer without publicly traded equity
securities is required to disclose the following information in the notes to
financial statements for a fiscal year ending after December 15, 2006, but
before June 16, 2007, unless it has applied the recognition provisions of this
Statement in preparing those financial statements:
a. A brief description of the provisions of this Statement
b. The date that adoption is required
c. The date the employer plans to adopt the recognition provisions of
this Statement, if earlier.
The requirement to measure plan assets and benefit obligations as of the date of
the employer's fiscal year-end statement of financial position is effective for
fiscal years ending after December 15, 2008. The management is currently
evaluating the effect of this pronouncement on financial statements.
9
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The management is currently
evaluating the effect of this pronouncement on financial statements. In March
2006 FASB issued SFAS 156 'Accounting for Servicing of Financial Assets' this
Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, with respect to the
accounting for separately recognized servicing assets and servicing liabilities.
This Statement:
1. Requires an entity to recognize a servicing asset or servicing liability
each time it undertakes an obligation to service a financial asset by
entering into a servicing contract.
2. Requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, if practicable.
3. Permits an entity to choose 'Amortization method' or 'Fair value
measurement method' for each class of separately recognized servicing
assets and servicing liabilities.
4. At its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with
recognized servicing rights, without calling into question the treatment of
other available-for-sale securities under Statement 115, provided that the
available-for-sale securities are identified in some manner as offsetting
the entity's exposure to changes in fair value of servicing assets or
servicing liabilities that a servicer elects to subsequently measure at
fair value.
5. Requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of
financial position and additional disclosures for all separately recognized
servicing assets and servicing liabilities.
This Statement is effective as of the beginning of the Company's first
fiscal year that begins after September 15, 2006. Management believes that
this statement will not have a significant impact on the consolidated
financial statements.
In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that otherwise would
require bifurcation, clarifies which interest-only strips and principal-only
strips are not subject to the requirements of SFAS No. 133, establishes a
requirement to evaluate interest in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation, clarifies
that concentrations of credit risk in the form of subordination are not embedded
derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
qualifying special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. This statement is effective for all financial instruments acquired
10
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
or issued after the beginning of the Company's first fiscal year that begins
after September 15, 2006. The Company has not evaluated the impact of this
pronouncement its financial statements.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections." This statement applies to all voluntary changes in accounting
principle and requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless this would be
impracticable. This statement also makes a distinction between "retrospective
application" of an accounting principle and the "restatement" of financial
statements to reflect the correction of an error. This statement is effective
for accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. We are evaluating the effect the adoption of this
interpretation will have on its financial position, cash flows and results of
operations.
4. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company did not earn any revenue during
the three month period ended September 30, 2006. The Company has accumulated
deficit of $3,915,328, a net loss of $6,015 during the three month period ended
September 30, 2006. The continuing losses have adversely affected the liquidity
of the Company. Losses are expected to continue for the immediate future. The
Company faces continuing significant business risks, which includes but not
limited to, its ability to maintain vendor and supplier relationships by making
timely payments when due.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable effort
from inception through the quarter ended September 30, 2006, towards (i)
obtaining additional equity (ii) management of accrued expenses and accounts
payable (iii) liquidation of the software "PCA(TM)" and (vi) searching for a
suitable strategic partner.
Management believes that the above actions will allow the Company to continue
operations through the next fiscal year.
5. DUE FROM RELATED PARTY
Concierge Technologies, Inc. has no bank account in its own name. Wallen Group,
a consulting company headed by the president and director of the Company,
maintains an administrative account for the Company. As of September 30, 2006,
$904 is due from Wallen Group.
11
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES PAYABLE - RELATED PARTIES
Notes payable consisted of the following at September 30, 2006:
Notes payable to shareholder, interest rate of 8%, unsecured
and payable on October 1, 2006 (past due) 35,000
Notes payable to director/shareholder, non-interest bearing
unsecured and payable on demand 8,500
Notes payable to shareholder, interest rate of 10%, unsecured,
and payable on July 31, 2004 (past due) 5,000
Notes payable to shareholder, interest rate of 10%, unsecured
and payable on October 1, 2004 (past due) 28,000
Notes payable to shareholder, interest rate of 8%, unsecured
and payable on October 1, 2004 (past due) 14,000
Notes payable to director/shareholder, interest rate of 8%,
unsecured and payable on September 1, 2004 (past due) 3,500
Notes payable to shareholder, interest rate of 8%, unsecured
and payable on October 1, 2005 20,000
Notes payable to director/shareholder, interest rate of 8%,
unsecured and payable on February 1, 2006 5,000
Notes payable to director/shareholder, interest rate of 8%,
unsecured and payable on June 1, 2006 5,000
Notes payable to director/shareholder, interest rate of 8%,
unsecured and payable on February 1, 2006 2,500
-----------
Notes payable to director/shareholder, interest rate of 6%,
Unsecured and payable on September 1, 2007 1,000
-----------
Total Notes payable $ 127,500
===========
The Company has recorded interest expense payable to related parties, amounting
to $2,562 and $2,040 for the three month periods ended September 30, 2006 and
2005, respectively.
12
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. SHARES OF CONCIERGE, INC. ISSUED SUBJECT TO CONTINGENCY AND
SUBSCRIPTIONS RECEIVED FOR COMMON STOCK SUBJECT TO CONTINGENCY
Concierge, Inc. (CI) issued 117,184 shares for cash totaling $202,061 and
354,870 shares for services of $3,549 during the year ended June 30, 2000. Since
December 1998, CI sold securities to persons in six states in the U. S. CI did
not file Form D or other filings in any of the states or with the SEC for such
shares and did not properly follow the requirements for complying with available
exemptions in each state. Accordingly, all such shares are subject to the
contingency that they may have been issued without the availability of an
exemption from registration under the Securities Act of 1933 and under the
securities laws of each of the six states. Therefore, CI has treated all such
shares issued since December 1998, as Common stock issued subject to
contingency. Total shares issued subject to contingency through June 30, 2006,
were 680,504 for cash and services amounting to $266,610.
Concierge, Inc. (CI) entered into subscription agreements to issue "post merger"
shares in exchange for cash. Through December 31, 2000, CI had received advance
subscriptions for a gross amount of $1,255,500 before deducting associated costs
of $79,710, for 5,928,750 post merger shares. In the event the merger between CI
and the Company is not completed prior to November 31, 2000, the obligation of
the Company under this agreement may be satisfied by the issuance of shares in
the Company equivalent on a pro-rata basis to the number of shares in "post
merger" Corporation that were subject to this agreement.
CI merged with the Company on March 20, 2002. The Company filed a registration
statement with the Securities and Exchange Commission ("the Commission") on June
8, 2000 related to the proposed merger, naming CI as the entity proposed to be
merged into the Company. From July 1, 2000 through September 15, 2000, CI
received additionally $487,500 as advance subscription for 2,127,500 post merger
shares in an offering intended to be exempt from registration pursuant to the
provisions of Section 4(2) of the Securities Act of 1933 and of Regulation D,
Rule 506 of the Commission. It is possible, but not certain, that the filing of
the registration statement by the Company and the manner in which CI conducted
the sale of the 2,127,500 post merger shares of common stock constituted
"general advertising or general solicitation" by CI. General advertising and
general solicitation are activities that are prohibited when conducted in
connection with an offering intended to be exempt from registration pursuant to
the provisions of Regulation D, Rule 506 of the Commission. CI does not concede
that there was no exemption from registration available for this offering.
Nevertheless, should the aforementioned circumstances have constituted general
advertising or general solicitation, CI would be denied the availability of
Regulation D, Rule 506 as an exemption from the registration requirements of the
Securities Act of 1933 when it sold the 2,127,500 post merger shares of common
stock after June 8, 2000. Should no exemption from registration have been
available with respect to the sale of these shares, the persons who bought them
would be entitled, under the Securities Act of 1933, to the return of their
subscription amounts if actions to recover such monies should be filed within
one year after the sales in question. Accordingly, the amounts received by CI
from the sale of these shares are set apart from Stockholders' Equity as
"Subscription received for common stock subject to contingency" to indicate this
contingency. The total contingent liabilities related to such shares amounted to
$1,929,900 ($2,009,610 less cost and expenses of $79,710).
On January 1, 2005, the Company re-classified such shares to its equity since
the lapse of time had removed any contingencies because of applicable statutes
of limitation.
13
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMON STOCK
On May 5, 2004 the Company issued 9,999,998 shares of its common stock valued at
$500,000 in exchange for Planet Halo's 100% outstanding and issued shares on a
ratio of, 8.232 shares of the Company to each share of Planet Halo stock.
9. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
During the twelve months ended June 30, 2006, the Company paid all tax
liabilities outstanding with the Franchise Tax Board of the State of California
for the fiscal years ended June 30, 2003, 2004 and 2005, including all
calculated penalties and interest, totaling $3,322.97. On August 10, 2006 the
Company paid the minimum tax requirement for the fiscal year ending June 30,
2007 to the State of California, and together with a penalty payment in the
amount of $33.59 paid on July 27, 2006, settles all amounts owing to the State
of California Franchise Tax Board. The amount reserved for income tax in the
accompanying financial statements as been appropriately adjusted to reflect the
current status.
On August 12, 2006, the Company signed a promissory note and borrowed $1,000
from David Neibert, a director. The Note is due before or on September 1, 2007
and bears an interest rate of 6%. Upon default, the holder has the right to
foreclose or otherwise enforce all liens or security interests securing payment
hereof from the Company.
August 17, 2006, Planet Halo closed its bank account at Schwab, repaid the
outstanding unsecured note in the amount of $3,251 to Marc Angell, and
transferred the balance of $636 to The Wallen Group account maintained for
Concierge.
10. COMMITMENT
The Company is co-located with the president of the Company and pays no rent.
Rent expense was $0 for the three month periods ended September 30, 2006 and
2005.
11. LITIGATION
On May 6, 2002, a default judgment was awarded to Brookside Investments Ltd
against, jointly and severally, Concierge, Inc, Allen E. Kahn, and The Whitehall
Companies in the amount of $135,000 plus legal fees. The Company did not defend
against the complaint by Brookside, which alleged that Brookside was entitled to
a refund of their investment as a result of a breach of contract. Brookside had
entered into a subscription agreement with Concierge, Inc., which called for,
among other things, the pending merger between Starfest and Concierge to be
completed within 180 days of the investment. The merger was not completed within
180 days and Brookside sought a refund of their investment, which Concierge was
unable to provide. The Company has accrued the judgment amount of $135,000 in
the year 2002 as litigation settlement in the accompanying financial statements.
This amount is included in accrued expenses as of September 30, 2006.
14
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. ACQUISITION & IMPAIRMENT OF INTANGIBLE ASSET
On April 6, 2004 the Company and Planet Halo entered into Stock Purchase
agreement whereby, when consummated, the Company would purchase all of the
outstanding and issued shares of Planet Halo in exchange for 10 Million shares
of the Company's common stock valued at $500,000. On April 20, 2004 all of the
conditions of the acquisition were met apart from the issuance of the shares. On
May 5, 2004, the Company issued the shares on a ratio of 8.232 shares of the
Company to each share of Planet Halo stock. The shares were issued directly to
the shareholders of Planet Halo. The existing Planet Halo shares were retired
and cancelled. The Company is now a sole shareholder of Planet Halo, a Nevada
corporation. On May 5, 2004 the President of Planet Halo was officially
appointed to the Board of Directors of the Company along with one other Planet
Halo named appointee.
Planet Halo is a development stage company involved in the wireless
telecommunications industry through the design, manufacture, sale and
distribution of hardware and services that include a hand-held wireless Internet
appliance/cell phone known as the "Halo", and an integrated wireless gateway
interface to the Internet named "Halomail."
The purchase price was determined in arms-length negotiations between the
parties. The assets acquired in this acquisition include without limitation
computer hardware and goodwill. A summary of the Planet Halo assets acquired and
consideration for is as follows:
Allocated amount
----------------
Cash $ 2,912
Equipment, net 245
Goodwill 496,843
----------
$ 500,000
Consideration paid
------------------
10,000,000 shares of common stock $ 500,000
==========
The Company evaluates intangible assets, goodwill and other long-lived assets
for impairment, at least on an annual basis and whenever events or changes in
circumstances indicate that the carrying value may not be recoverable from its
estimated future cash flows. Recoverability of intangible assets, other
long-lived assets and, goodwill is measured by comparing their net book value to
the related projected undiscounted cash flows from these assets, considering a
number of factors including past operating results, budgets, economic
projections, market trends and product development cycles. If the net book value
of the asset exceeds the related undiscounted cash flows, the asset is
considered impaired, and a second test is performed to measure the amount of
impairment loss. Potential impairment of goodwill is being evaluated in
accordance with SFAS No. 142. The SFAS No. 142 is applicable to the financial
statements of the Company beginning July 1, 2002.
On December 31, 2004, the Company evaluated the valuation of goodwill based upon
the performance and market value of the acquisition. The Company determined the
goodwill is impaired and recorded the impairment of $496,843 in the accompanying
financial statements.
The Company evaluated value of its prepaid expenses during the year ended June
30, 2004 and based upon uncertainness surrounding the utilization of its
software for the "PCA" development, the Company has recorded an impairment of
the prepaid expense amounting $245,800.
15
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. FORMATION OF NEVADA SUBSIDIARY
On April 20, 2005, the Company formed a subsidiary corporation under the laws of
the State of Nevada. The subsidiary corporation, Concierge Technologies, Inc.
(Nevada) was formed for the purpose of re-domesticating the Company stock in the
State of Nevada and dissolving the California Corporation. The action was taken
pursuant to a vote in favor by a majority of shareholders of the Company. On
March 2, 2006, the Company filed articles of merger with the Secretary of State
in Nevada effectuating the merger of Concierge Technologies, Inc. of California
into the Nevada subsidiary. In order to consummate the merger, the Secretary of
State in California requires a Certificate of Tax Clearance from the Franchise
Tax Board. The delay in acquiring the tax clearance caused for the Nevada
Corporation to become inactive. On September 22, 2006 the Franchise Tax Board
issued the tax clearance certificate. On October 6, 2006 the tax clearance
certificate from California, and the other documents necessary to reactivate
Concierge Technologies, Inc. in Nevada, were filed in the respective states. The
Secretary of State of California has acknowledged receipt of the tax clearance
certificate and the merger documents and the Articles of Merger were filed with
the State of California on October 5, 2006. Concierge Technologies, Inc. is now
a Nevada corporation. Consent of Service will be to the Resident Agent in
Nevada, Capitol Corporate Services, Inc., 202 South Minnesota Street, Carson
City, NV 89703.
14. SUBSEQUENT EVENTS
On October 2, 2006, the Company signed a promissory note and borrowed $12,500
from Marc Angell, a director. The Note was repaid in full on October 25, 2006.
On October 16, 2006 the Company signed a promissory note and borrowed $15,000
from Polly Force Ltd, a Hong Kong corporation and affiliate of the Company. The
Note is due before or on November 1, 2007 and bears an interest rate of 8%. Upon
default, the holder has the right to foreclose or otherwise enforce all liens or
security interests securing payment hereof from the Company.
On July 19, 2006 Allen Kahn, Chairman of the Board, received a unanimous vote
from the directors in favor of issuing Five Million (5,000,000) shares of stock
to compensate Ryan Consultants Ltd, a Jersey, UK corporation, who have provided
the services for the previous two years. The shares of stock were issued on
November 1, 2006.
16
Item 2. Plan of Operation
Our plan of operation for the next twelve months is to do the following:
o exploit the opportunities afforded us through our acquisition of
Planet Halo by implementing a sales strategy to deploy the
wireless gateway, Halomail, on synergistic networks,
o acquire revenue streams by partnering and other business
combinations with development stage wireless and technology
companies seeking marketing expertise and investment liquidity,
o source a buyer for our PCA pre-paid inventory in bulk form and
utilize the proceeds for working capital.
On April 6, 2004, our company signed a definitive agreement to acquire the
privately-held company, Planet Halo, in a cash-free stock transaction. On April
20, 2004 the companies completed the necessary documentation to effect the
acquisition. On May 5, 2004 Concierge Technologies instructed its transfer agent
to issue the purchase price in shares of common stock to the shareholders of
Planet Halo. The transaction was officially closed and the shares considered
issued as of May 5, 2004.
Planet Halo is a development-stage company that has developed a prototype,
hand-held, wireless Internet appliance named the "Halo". The Halo is able to
send and receive email, short messages, run applications such as address book,
calculator, scheduler, etc and operates as a fully functional cellular
telephone. In addition to the Halo device Planet Halo also has an exclusive
license to deploy a proprietary wireless gateway in North America. The gateway,
named "Halomail", provides a secure interface for wireless access to the
Internet, and to the worldwide web. Users of the Halo or other wireless devices
may use Halomail as their email client, a secure connection for monetary
transactions, browse the worldwide web, connect to their own Intranets, and
essentially use the gateway as a secure on-ramp to the Internet in much the same
way as a wired connection operates. Concierge plans to move the Halo device into
production readiness and to seek partners for the launch of the Halomail gateway
on service provider networks.
On June 17, 2002, David W. Neibert became our President and Chief
Operations Officer. Upon assuming that role, he moved the general accounting and
administrative offices of our company to a co-location with his firm, The Wallen
Group. We do not currently pay rent and have no lease for the facilities being
provided by Mr. Neibert.
As of September 30, 2006, we had no employees and no fixed overhead other
than the variable cost of web hosting, legal and professional fees, fees charged
by our transfer agent and minimum tax payments. We have a limited amount of
office fixtures, furniture and computer equipment acquired with the Planet Halo
transaction. Our president, the president of Planet Halo, our CEO and directors
17
are continuing to provide services without cash compensation; however, there are
no assurances that this situation will continue for the indefinite future.
Liquidity
Our primary source of operating capital has been funding sourced through
insiders or shareholders under the terms of unsecured promissory notes. In two
instances we have sold shares of our common stock in exchange for cash. The
amount of borrowed funds and funds from equity sales has been sufficient to pay
the cost of legal and accounting fees as necessary to maintain a current
reporting status with the Securities and Exchange Commission and pay our
required state income taxes. However, sufficient funds have been unavailable to
significantly pay down commercial and vendor accounts payable. We have also been
unable to pay salaries to our officers and several of our outside consultants
who had performed services during the past and present fiscal years.
Although our management is continuing to provide services to the Company
for the near term without cash compensation, we will still require additional
funding to maintain the corporation and to realize our objectives with third
parties. With the acquisition of Planet Halo there are added demands for
operating capital. The Company has been aggressively pursuing financing for the
funding of the Halomail service implementation, however the financial advisor
retained to assist with the effort has not produced a satisfactory result. Until
such time as definitive agreements are reached with investors, such a financing
remains speculative. If the financing is not available, then Halomail may not be
put into service. In the event the financing is not completed, our funds and
inventory assets will be exhausted at some point and continuing operations may
be impossible.
Item 3. Controls and Procedures
Evaluation of disclosure controls and procedures. The Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of the end of the period covered by this
report. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures provide reasonable assurances that the information the Company is
required to disclose in the reports it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time period required by the Commission's rules and forms. There were no
significant changes in the Company's internal control over financial reporting
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect our internal controls over financial
reporting.
18
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed, by incorporation by reference, as part of
this Form 10-QSB:
Exhibit Item
------- ----
2 - Stock Purchase Agreement of March 6, 2000 between Starfest,
Inc. and MAS Capital, Inc.*
3.1 - Certificate of Amendment of Articles of Incorporation of
Starfest, Inc. and its earlier articles of incorporation.*
3.2 - Bylaws of Concierge, Inc., which became the Bylaws of
Concierge Technologies upon its merger with Starfest, Inc.
on March 20, 2002.*
3.5 - Articles of Merger of Starfest, Inc. and Concierge, Inc.
filed with the Secretary of State of Nevada on March 1,
2002.**
3.6 - Agreement of Merger between Starfest, Inc. and Concierge,
Inc. filed with the Secretary of State of California on
March 20, 2002.**
3.7 - Articles of Incorporation of Concierge Technologies, Inc.
filed with the Secretary of State of Nevada on April 20,
2005.+
3.8 - Articles of Merger between Concierge Technologies, Inc., a
California corporation, and Concierge Technologies, Inc., a
Nevada corporation, filed with the Secretary of State of
Nevada on March 2, 2006 and the Secretary of State of
California on October 5, 2006.+
10.1 - Agreement of Merger between Starfest, Inc. and Concierge,
Inc.*
14 - Code of Ethics for CEO and Senior Financial Officers.***
19
31 - Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.1 - Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32 - Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.1 - Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
*Previously filed with Form 8-K12G3 on March 10, 2000; Commission File No.
000-29913, incorporated herein.
**Previously filed with Form 8-K on April 2, 2002; Commission File No.
000-29913, incorporated herein.
***Previously filed with Form 10-K FYE 06-30-04 on October 13, 2004;
Commission File No. 000-29913, incorporated herein.
+Previously filed with Form 10-K FYE 06-30-06 on October 13, 2006;
Commission File No. 000-29913, incorporated herein.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the Registrant
has caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Dated: November 20, 2006
CONCIERGE TECHNOLOGIES, INC.
/s/ David W. Neibert
By
----------------------------
David W. Neibert, President
20